Report: Innovators shaking up tradition-bound construction industry

Geneva — New technologies are transforming the engineering and construction (E&C) sector at an accelerated pace, according to a new report compiled by the World Economic Forum in collaboration with The Boston Consulting Group (BCG). The report, Shaping the Future of Construction: Inspiring Innovators Redefine the Industry, analyzes 10 innovation leaders, identifies key success factors, and makes policy recommendations for accelerating innovation in construction.

Relative to other industries, productivity in E&C has stalled over the past 50 years. Technology was not making any fundamental advances, and companies remained averse to changing their traditional methods. Recently, however, transformative technological developments have emerged, and some pioneering firms have adopted them for current projects. These developments — 3D printing, building information modeling, wireless sensing, and autonomous equipment, to name just a few — are already starting to turn traditional business models upside down.

The 10 lighthouse innovation cases in the report illustrate the value of embracing innovations. Prominent flagship projects, such as Dubai’s Burj Khalifa, the world’s tallest building, and The Edge in Amsterdam, the world’s most sustainable office building, showcase state-of-the-art innovation. So too do the various pilot projects or startups that the report analyzes, such as the 3D printing of houses by the Chinese company Winsun or the predictive analytics of construction data by the Chicago-based firm Uptake, Forbes’s hottest startup of 2015. Jointly, their inspirational stories give a glimpse of the industry’s future.

“To paraphrase William Gibson: the future of construction is here now — it is just not evenly distributed. Innovative companies and projects, as described in the report, demonstrate the art of the possible and how to address the challenges involved,” says Philipp Gerbert, a BCG senior partner and coauthor of the report. “The impact of these innovations on the traditional construction ecosystem will be interesting to follow. We see a widening gap between the innovation laggards and leaders, in particular with regards to their digital transformation.”

Companies need to spearhead industry transformation

On the basis of BCG’s analysis of these successful innovators, the report suggests ways for companies to stimulate innovative ideas, turn those ideas into reality, and ultimately succeed in the market. Pioneering firms, for instance, create an innovation-friendly culture that rewards risk taking; they take a longer-term product perspective, rather than thinking in terms of individual projects; and they proactively shape the regulatory environment. Companies have nothing to gain from delaying. Once they implement innovations, the benefits — lower costs, shorter delivery times, and reduced environmental impact — can begin to accumulate.

Governments’ crucial contribution

Governments are crucial participants in the transformation of the construction industry. They need to create an environment conducive to the adoption of innovative technology as a regulator, strategic incubator, or project owner. The report recommends that governments should update building codes, move to performance-based and forward-looking standards, and introduce more flexible procurement models in infrastructure projects to overcome typical hurdles for innovation.

In fact, infrastructure is again high on the agenda in almost all regions of the world. In the words of John Beck, president and CEO of Aecon Construction Group, one of Canada’s leading construction companies: “There has always been a mismatch between the need for infrastructure assets and the capital to fund them. We now have a new opportunity to narrow that gap — by leveraging all the remarkable innovations that have emerged in recent years.” For infrastructure and other built assets alike, innovation will boost the value over their entire life cycle.

As construction companies reap the benefits of innovation, so too will their clients and the community at large. “Incremental change is not an option; by redefining the ultimate frontier, leapfrogging innovations in construction will finally help to address major societal challenges, from mass urbanization to climate change,” says Michael Buehler, head of infrastructure and urban development at the World Economic Forum. “The widespread adoption of these innovations is going to make a serious difference, both economically and environmentally.”